The global energy sector has responded aggressively to the news about very effective Covid-19 vaccines from both Pfizer and Moderna, discounting a return to normal energy markets as mobility activity returns to more normal levels in 2021. The global energy sector is up 27% driven by a positive response in crude oil prices and positioning as our recent commodity note talks about.

In a longer and relative perspective to the global equity market the energy sector is still down 60% since the recent relative peak in January 2017. The recent move has closed the relative gap by 17% but there is still long way for energy markets to recover their position in financial markets. The energy sector is only 2.3% of S&P 500 and 5.1% of the global equity market including emerging markets. The move into energy stocks is part of a bigger move in equities from growth and momentum stocks into value and pro-cyclical sectors. The big question is whether this rotation will continue and whether 2021 could become the big comeback year for energy stocks that have suffered from Covid-19 and investors’ souring sentiment on black vs green energy.